> Bill of exchange > Promissory note > Power of attorney

1. PRESENTED BY
BHADRA S.P
S1 BBA LLB

2. SEMINAR
TOPICS
BILL OF EXCHANGE
PROMISSORY NOTE
POWER OF ATTORNEY

3. Bill of exchange means a bill drawn by a person
directing another person to pay the specified sum of
money to another person.
Illustration : X orders Y to pay Rs.50,000 for 90
days after date and Y accepts this order by signing
his name, then it will be a bill of exchange.

4.  Section 5 of Negotiable Instruments Act 1881
defines and explains about “Bill of Exchange”.
 Sec.5 “Bill of exchange”. – A “BILL OF
EXCHANGE” is an instrument in writing containing an
unconditional order, signed by the maker, directing a
certain person to pay a certain sum of money only to, or
to the order of, a certain person or to the bearer of the
instrument

5. ESSENTIAL CHARACTERISTICS OF BILL
OF EXCHANGE
 Unconditional order : A bill of exchange must be drawn unconditionally,
through the acceptor, or the indorser may make his liability conditional,
direction of payment by the drawer must not be made to depend upon a
contingency.
The reason is explained by The House of Lords in the leading case “Ross
vs. Empire Construction and Instrument Co.(1932)” as follows:
“The reason is that it would perplex the commercial transactions of
mankind and diminish and narrow their credit and negotiability if paper
securities of this kind were issued out into the world, encumbered with
conditions and contingencies, and if the persons to whom they were offered in
negotiation were obliged to inquire when these uncertain events would be
reduced to certainty. And hence the general rule is that the bill of exchange
always implies a personal general credit not limited to, or applicable to
particular circumstances and events which cannot be known to the holder in
the general course of negotiation.”
Therefore, it is essence of a bill exchange that it should be payable at all
events and it must appear so on its face.

6.  Money only: The consideration of a bill of exchange should be paid only by way
of money only. The amount to be paid should be certain.
 Time of payment: The time of payment must be indicated in the bill with
certainty.
 Order to pay: “Order” in this section does not mean a command, but a request
or a diection. Any other expression evidencing an intention to cause payment to be
made will do. It need not to be in any particular form. Any synonym expression, or
an expression conveying the meaning of “pay” will suffice, such as, “credit in
cash”.
 Drawer: it is essential that a bill of exchange should point out with certainty the
party who enters into the contract imported by its terms. Thus, the signature of the
drawer is necessary and there cannot be a bill, even if the instrument is accepted
without the signature of the drawer.

7.  Drawee: It must indicate a drawee who should be called on to accept or pay
it. The drawee must be named or otherwise indicated in the bill with
reasonable certainty.
 Date and Place: It should be specifically mention the date and place of the
payment or the place where is it drawn.
 Stamp Duty: Bills of Exchange must be stamped according to the provisions
of the Indian Stamp Act,1899.
Specimen Form:
Bill of exchange payable to order on demand.
Order bill payable on presentment or sight.
Ordinary bill payable to order after date or sight with interest.
Bill payable to bearer.
Note: No bill can be drawn payable to bearer on demand.

9.  Section 4 of Negotiable instrument Act, 1881 defines
“Promissory Note”.
 A Promissory Note is an instrument in writing (not being a
bank note or a currency note) containing an unconditional
undertaking, signed by the maker, to pay a certain sum of
money only to, or to the order of a certain person, or to the
bearer of the instrument.

10. REQUISITES OF A PROMISSORY
NOTE
The promissory note must be in writing.
It must contain an undertaking to pay. There must be an
express promise to pay.
The promise to pay should be unconditional.
The promissory note must be signed by the maker.
The sum payable must be certain.
The instrument must contain a promise to pay money and money only.
The maker and payee must be certain.

11. Stamping of promissory note is essential under the Indian Stamp Act, 1899. An
unstamped promissory note is note admissible to evidence and no suit can be
maintained. At present. One Rupee Revenue Stamp (minimum one) should be pasted on
the promissory note and One Rupee Revenue Stamp (minimum one) on the
acknowledgement of the promissory note. If a surety or sureties come forward to give
guarantee for the payment of the promissory note amount, such a surety or sureties
should execute a separate bond valuing Rs.100/- .non-judicial stamp or Rs.100/-
adhesive stamp.
It must contain date of the execution.
The limitation period for a promissory note to file a suit is 3 years.
Surety/sureties: sometimes, the lender may ask for the surety for money lent. In such
a case the debtor should provide one or two sureties. This sureties must also sign on the
promissory note undertaking that he or they (Sureties) shall pay the debt in case of
default by the debtor. One rupee Revenue Stamp should be affixed on the surety bond,
and surety/sureties should sign on the stamp affixed on the surety bond. Else the surety
bond becomes invalid.

13. Distinction between “Promissory Note”
and “Bill of Exchange”
PROMISSORY NOTE BILL OF EXCHANGE
Promissory note is defined in Sec.4 of
N.I. Act.
Bill of Exchange is defined in Sec.5 of
N.I. Act.
There are two parties only (i) Maker and
(ii) Payee.
There are three parties (i) The Drawer,
(ii) the Drawee; and (iii) the Payee.
A promissory note contains a Promise to
pay.
A bill of exchange contains an Order to
pay.
The liability of a maker of the promissory
note is primary and absolute.
The liability of the drawee of a bill of
exchange is secondary and conditional.
A promissory note cannot be made
conditionally.
A bill may be accepted.
The maker of a promissory note stands
in relation with the payee
The drawer of a bill of exchange stands
in direct relation with the accepter.

14. Meaning :
Power = an ability, authorization
Attorney = a person who has legal to act on behalf of another, a legal agent
qualified to act for someone engaged in legal proceedings
Power of Attorney : ‘A’ is working in Hyderabad. He has certain properties in
Kerala. He is unable to manage those properties himself, being he is an employee
and working at a long distance place. He may authorize any one of his friends or
relatives at Kerala to manage his properties. The person so authorized is called
‘Attorney’ the person who gives such authorization is called ‘principal’. The
instrument by which such power is conferred is called ‘Power of Attorney’. There
may be more than one principal or more than one attorneys

15. Kinds of Power of
Attorney
Special Power of Attorney
General Power of Attorney
 Special Power of Attorney: where the principal authorizes attorney to do a specific
work, such power is called “Special Power of Attorney”
Illustration :
 ‘A’ sells his property at a distant place, and have necessary contracts with purchaser.
‘A’ is unable to go that town, where the property is situated and to register in favour of
the purchaser. In such circumstance, he authorizes his one of his family members or
relatives or friends to get the registration work on the name of ‘A’ and in favour of the
purchaser
 ‘B’ instituted a suit against ‘X’ with regard to a property. ‘X’ could not go to the village
where the property situated, due to his employment or business at a distant place. ‘X’
gives special Power of Attorney to his one of his family members or relatives or friends
to defend the case

17.  General Power of Attorney: this type of power includes to do all acts
necessary
Scope: The Power of Attorney Act 1882 deals with the Law pertaining to the
appointment and the power of attorneys
Object: In appointing a Power of Attorney, one could save his valuable time.
It is a convenience. It protects his property or right.
 Execution and authentication: Sec.4 of Power of Attorney Act 1882
provides a protect of execution and authentication of an instrument of Power of
Attorney
NOTE: A Power of Attorney should be executed before and authenticated by a judge,
magistrate or a notary.
 Registration: There is another way of execution of Power of Attorney. An
instruments of powers of attorney may be registered. However it is optional the
law provided two ways of execution of power of attorney. Sec.4 of the power of
attorney Act 1882 is one and registration is another. The people prefer the
second method of execution, being easily accessible.

18.  Stamp Duty : Non-judicial stamp of worth Rs.20/- is required for
special power of attorney, non-judicial stamp of worth Rs.50/- is
required for general power of attorney. These rates are applicable for
the number of principals ranging from 1 to 4. Non-judicial stamp of
worth Rs.75/- shall have to be used the number of the principals ranges
from 5 to 10. Rs.25 shall be charged extra for every additional principal
after 10.
 Revocation : The principal may revoce the instrument of power of
attorney at any time a notice of revocation in writing served upon the
attorney or attorneys. It may be circulated in local newspaper. Until it is
revoked, it shall be in force. By the death of either party, it ceases to
operate